The U.S. Department of Justice and the Federal Trade Commission have released for public comment proposed revisions to the Horizontal Merger Guidelines that would reflect antitrust enforcers’ ever decreasing reliance on the bright-line tests that once dominated merger analysis.

The proposed revisions would continue the long term trend of antitrust authorities exercising more flexibility and discretion in analyzing individual mergers.  The revised Guidelines signal a willingness by antitrust enforcers to be expansive in considering evidence of competitive effects, and a disinclination to rigidly apply traditional tests such as market definition.

Interested parties have until May 20, 2010, to provide comments on the proposed revised Guidelines.

The Guidelines, which were issued in 1992 and revised in 1997, outline the two agencies’ antitrust enforcement policy in reviewing horizontal mergers.  The proposed revisions to the Guidelines are intended to reflect the agencies’ experience and their current approach to merger review.  The revisions are also informed by a series of public workshops the two agencies have held

The proposed revised Guidelines include a new Section 2 on “Evidence of Adverse Competitive Effects,” which discusses types of evidence and sources of evidence the agencies will turn to in assessing the likely competitive effects of mergers. For instance, evidence of post-merger price increase or other changes adverse to customers is given substantial weight by the agencies – if these changes are anticompetitive effects resulting from the merger they can be dispositive for the agencies.  A consummated merger can be anticompetitive even if price increases or other changes adverse to customers are not felt – the merged firm may be aware of the possibility of post-merger antitrust review and purposefully moderating its conduct. click here for more »

The European Commission has enacted highly anticipated antitrust rules regulating online sales.

The rules clamp down on what the EC considers to be permissive distribution agreements that have arisen on occasion between goods manufacturers and resellers, and update regulations adopted prior to the massive growth in the last 10 years in commerce over the Internet.

The new rules are primarily aimed at facilitating online sales, which play a critical role in generating economic growth and integration across borders.  The rules allow manufacturers a relatively free hand in deciding their methods of selling goods in the European market as long as they have less than a 30 percent market share.  However, fixing resale prices remains restricted as harmful to competition. 

The revised rules are a result of several influences, according to press reports, that included heavy lobbying from luxury and online goods companies.

Luxury goods manufacturers in particular have been concerned with the cost of maintaining their brand image, and the EC took into account some of their arguments in fashioning the updated regulations.  For instance, some luxury goods manufacturers will be allowed to insist that their goods be sold online only by retailers that also have “bricks and mortar” stores.  Thus, purely online retailers such as Amazon and eBay would be unable to sell these goods directly.

Some industry observers have commented that this lobbying led to a more “watered down” version of the antitrust sales regulations that would have resulted otherwise.  Also, the new EU-wide rules will open up online sales by ensuring that manufacturers cannot discriminate against online shops when setting up their distribution networks.

If you’ve ever wondered why Dilbert is still working for his insufferable pointy-haired boss, the answer could be collusive hiring practices at high tech companies.

Recent news reports indicate the U.S. Department of Justice is ramping up its investigation into hiring practices at large U.S. tech companies.  The probe is looking into whether the companies’ hiring practices are costing skilled computer engineers and other workers opportunities to change jobs for higher pay or better benefits.

According to news reports, the DOJ investigation, which began more than a year ago, is focusing on whether the tech companies – including IBM, Google, Apple, Intel Corp., and IAC/InterActiveCorp – have agreed to restrict hiring of employees away from each other.  The Wall Street Journal reported recently that the Justice Department has “concluded that such agreements do raise significant competitive concerns.”

The Department of Justice is concerned that such agreements could decrease competition for workers, leading to artificially lower pay and fewer opportunities for movement within the tech job market.  On one hand, maintaining a lower labor cost through these agreements could be viewed as tantamount to fixing costs, similar to the more familiar antitrust violation of price fixing.

On the other hand, companies say that their hiring practices do not violate competition laws, and in fact, may be necessary in order to encourage new partnerships since prospective partners may fear the loss of key employees otherwise. 

Although the Department of Justice has not verified publicly its investigation, companies have reported being contacted about their hiring practices.  In the coming weeks, more than 10 companies will meet with the Department of Justice to discuss the issue.

The U.S. Court of Appeals for the District of Columbia decision in Comcast v. FCC – striking down the FCC’s Order prohibiting Comcast from discriminating against customers that download large video files – may seem like a significant defeat for the FCC, but it might turn out to be just the first skirmish in an escalating war.

The Court’s decision dealt a decisive blow to an argument used (once too often) by the FCC under Chairman Martin, attempting to ground the FCC’s jurisdiction on “ancillary authority.”  The Commission contended that it had the power to regulate ISPs from limiting consumer access to certain types of Internet content on a discriminatory basis (known as “net neutrality”), even though Congress has never given the FCC specific statutory authority to do so.  Rather, the Commission constructed a series of arguments that its regulatory power over the Internet – classified for the last decade by the FCC as an “information service” – derived from other statutory powers and congressional policy statements as to the FCC’s responsibilities. 

Conceding that Congress intended the FCC to have jurisdiction to keep pace with technological change, and that the Internet is the most important communications innovation of this generation, the D.C. Circuit nonetheless repeated its warning from prior cases:  “the allowance of wide latitude in the exercise of delegated powers is not the equivalent of untrammeled freedom to regulate activities over which the statute fails to confer . . . Commission authority.”

Questions immediately turned to the fate of FCC’s recently-announced, broadly acclaimed, National Broadband Plan.   Some elements of the Plan are founded more squarely in statutory jurisdictional grants and confirmations of authority – such as reclaiming broadcast spectrum for broadband uses, enhancing use of broadband for public safety, improving use of broadband in schools, and ensuring better competition for consumer electronics devices to access multichannel video programming (such as cable, satellite, and telco television content) – and will not be hindered by the decision.

So, for example, the Commission’s agenda to spur new competition for set-top boxes and to require a neutral “gateway” device to network together television and Internet content in the home, will remain on the fast-track this year.  Other elements, however, such as accelerating the rollout of broadband service to rural areas and low-income citizens, consumer protection, and net neutrality, will need to find an alternative source of Commission authority. 

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Google’s informal motto is “Don’t be evil.”  Whether or not it has breached that principle, the internet search and advertising giant may be about to run afoul of antitrust law, according to the Senate’s head antitrust watchdog.

On Tuesday, Senator Herb Kohl, chair of the antitrust subcommittee of the Senate Judiciary Committee, asked the Federal Trade Commission to take a closer look at Google’s proposed acquisition of AdMob, which provides advertisements on mobile phones.

According to Senator Kohl’s letter, “[c]ritics of this transaction worry that this deal will allow Google to merge with one of its biggest rival mobile advertising competitors.”  While Senator Kohl states that he has not concluded that the merger will create “dominance or would cause substantial harm to competition,” he nonetheless asks the FTC to “scrutinize this deal very closely,” and to ensure that any approval of the merger “will have sufficient safeguards to protect consumers’ privacy.” 

Google and AdMob, on the other hand, have stated that “experts have called mobile advertising a ‘very fragmented’ space, in which ‘no ad network is dominant’ and ‘no one really knows what ad network is biggest.’”  For instance, Apple has launched its own advertising platform – iAd – which will serve its omnipresent iPhone and its new iPad.

Given Apple’s prominence in the market and proven ability to exploit its consumer friendly hardware to gain advantages in complementary industries, the FTC will have to consider this development in its analysis of the Google/AdMob.  Whether that will change the ultimate analysis is hard to tell at this point. In other words, as even Senator Kohl’s letter acknowledges, the market may be too “nascent” to justify blocking the merger.

The FTC has apparently already assembled a team to investigate Google’s acquisition of AdMob.  Senator Kohl’s letter at the very least adds pressure on those lawyers to take a hard look at the merger.